Financial Gifts and VA Loans
The VA-eligible borrower is a fortunate borrower. As a result of service to country, the borrower is treated to a variety of earned benefits and one of the most popular is the VA home loan. This special program has competitive rates, easier qualifying and most importantly to most, requires no money down. Yet that doesn’t mean the veteran doesn’t have to come to the closing table without any money.
There are costs involved from an appraisal fee to homeowners insurance. If the veteran doesn’t have the required funds, the veteran can wait, get the seller to pay for the costs or get a financial gift from a relative. If the funds are from a gift, the VA program accepts those funds under certain guidelines.
Let’s say you put an offer on a home at $175,000 and the closing costs that you’re required to pay add up to $4,000. You don’t have to use your own funds but receive a gift of $4,000. The gift must come from a family member or non-profit institution that regularly provides homeowner assistance.
The gift from a family member requires the donor to complete a Gift Affidavit. This form contains the information about the donor, where the funds are coming from and tracks the financial transfer from the donor to the veteran’s account. The affidavit will have language that says something to the effect of “This is a gift, I am the donor and I do not expect these funds to be paid back.” The donor signs the form, returns it to the VA lender and the funds are wired to the settlement agent. The gift affidavit is evidence to the lender that the gift is indeed a gift and not a short term loan which could affect the ability of the veteran to pay the mortgage when due.